A spectral general circulation model (GCM) is run for perpetual January with fixed sea surface temperature conditions. It has internally generated, variable cloud optical properties as well as variable cloud arm and heights. The cloud optics are calculated as functions of the cloud liquid water contents. The cloud liquid water contents are in turn generated by the model hydrological cycle. Model generated and satellite albedos are in rough agreement. An analysis of the cloud radiative forcing indicates that cloud albedo (cooling) effects overcome cloud infrared opacity (heating) effects in most regions, which is in accord with the inferences from satellite radiation budget measurements. Furthermore, both the computed and observed albedo of clouds decrease from low to high attitudes. When compared to a version of the model with fixed cloud optics, the model with variable cloud optics produces significantly different regional albedos especially over the tropics. The cloud droplet size distribution is also found to have a significant impact on the model albedos. The temperature of the tropical upper troposphere is somewhat sensitive to the microphysical characteristics of the model cirrus clouds. The present study is an attempt to calculate the regional albedo of the planet more rigorously than has been done previously. Simplifying assumptions relating to cloud droplet size and lifetime must still be made. The model's results for the radiation budget are encouraging and it seems that the hydrological cycles of GCMs are sufficiently realistic to warrant a more physically based (than the one employed here) treatment of cloud microphysical and radiative processes.